Correlation Between Boeing and Hyatt Hotels

Can any of the company-specific risk be diversified away by investing in both Boeing and Hyatt Hotels at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Boeing and Hyatt Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Boeing and Hyatt Hotels, you can compare the effects of market volatilities on Boeing and Hyatt Hotels and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Boeing with a short position of Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Hyatt Hotels.

Diversification Opportunities for Boeing and Hyatt Hotels

0.6

Correlation Coefficient

Boeing  Hyatt Hotels

Poor diversification

The 3 months correlation between Boeing and Hyatt is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels and Boeing is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Boeing are associated (or correlated) with Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of Boeing i.e., Boeing and Hyatt Hotels go up and down completely randomly.

Pair Corralation between Boeing and Hyatt Hotels

Assuming the 90 days trading horizon The Boeing is expected to generate 1.09 times more return on investment than Hyatt Hotels. However, Boeing is 1.09 times more volatile than Hyatt Hotels. It trades about 0.17 of its potential returns per unit of risk. Hyatt Hotels is currently generating about 0.1 per unit of risk. If you would invest  13,746  in The Boeing on October 9, 2024 and sell it today you would earn a total of  2,790  from holding The Boeing or generate 20.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

The Boeing  vs.  Hyatt Hotels

Boeing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Boeing unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hyatt Hotels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hyatt Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hyatt Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Boeing and Hyatt Hotels

The main advantage of trading using opposite Boeing and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing position performs unexpectedly, Hyatt Hotels can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hyatt Hotels will offset losses from the drop in Hyatt Hotels' long position.

The idea behind The Boeing and Hyatt Hotels pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.